A day after a huge block of shares of Kenol Kobil, exchanged hands on the Nairobi Securities Exchange (NSE), came an announcement that Rubis Énergie intended to buy out all the remaining shares and delist the company.
Rubis had acquired 24.99% of Kenol from Wells Petroleum, at Kshs 15.30 per share on October 23, in a deal that was the highlight of the day at the NSE. The offer to other shareholders of Kenol, to buy the shares at Kshs 23 per share, a 53% premium, values the oil market leader in Kenya and the East Africa region, with 350 retail outlets, at Kshs 36 billion ($353 million).
Making the announcement in Nairobi was the Rubis Energie CEO Christian Cochet and CFO Bruno Krief. French company Rubis operates over 50 subsidiaries and its downstream business had 2017 sales revenues of Euros 2.7 billion and net income of Euros 187 million while its midstream business has sales of Euros 895 million and net income of Euros 53 million. It is a subsidiary of Rubis SCA Group which is listed on the Euronext Paris stock exchange.
The company which operates in Southern Africa, Western Africa, North Africa and islands off the continent, intends to appoint a majority of the board of directors and use Kenol to extend its reach in East Africa as a part of Rubis operations and development strategy through acquisitions which may mean lower dividend payments.
If the deals succeeds, they will pay Wells an amount equal to the difference in the price they paid on October 23 and what other Kenol shareholders will get. Rubis intends to acquire the other 75% of the company in addition to new shares from Kenol CEO David Ohana who has already undertaken to sell the shares which were granted to him through the Kenol ESOP to Rubis. Once they get the approval of 90% of Kenol shareholders, they intend to delist the company and will move to trigger this once they get to over 75% of shares. The transaction advisors are Stanbic Bank Kenya and SBG Securities who also double up as the sponsoring broker and lead acceptance agent.
However, a few hours after receiving a notice about the Rubis cash offer for Kenol, Kenya’s Capital Markets Authority announced that it was launching an investigation into suspicious trades in relation to the takeover transaction and asked Kenya’s Central Depository and Settlement Corporation to place a freeze on the suspected accounts.
The Rubis deal comes a few years after Kenol tried to engineer a majority sale to Puma Energy and Kenol is also in the process of acquiring fuel stations in Rwanda land Uganda in two separate deals.
Excerpts from the 2016 Kenol AGM of shareholders.
The President of Kenya signed the Finance Bill 2018 after a stormy debate in Parliament last week that saw chaotic arguments about vote procedure methods used and actual vote counting mainly with regards to VAT on petrol products.
Some of the earlier clauses in the Finance Bill had been highlighted and KPMG, which has done a series of articles, has provided a further update on aspects of the laws in Kenya and which they termed “..the changes present an unprecedented disruption of the tax regime that will impact the economy and citizenry for years to come.”
Their perspective on the signed Finance Bill implications:
- Excise duty on services: The President accepted Parliament’s decision to drop a Robin Hood tax of 0.05% on money transfers above Kshs 500,000 (~$5,000). But the shortfall was replaced by an increase in taxes on all telephone and internet data services, fees on mobile money transfers, and all other fees charged by financial institutions which all now go up by 50% – and which KPMG writes may have a negative impact on financial inclusion.
- A national housing development levy was approved. With the country’s wage bill of Kshs 1.6 trillion, KPMG estimates that government can potentially collect Kshs 48 billion a year (~$480 million) from the levy, (Kshs 24 billion of which will be from employers) – a massive amount when compared to the Kshs 12.8 billion that NSSF – the National Social Security Fund collects in a year. Regulations for the National Housing Development Levy Fund (NHDF) have not been set, other than that the payments are due by the 9th of the following month. For employees who qualify for affordable housing, they can use that to offset housing costs but for those who don’t qualify, they will get a portion of their contributions back after 15 years.
- Petroleum VAT: KPMG says that a significant portion of the government’s tax targets for 2018/19 was dependent on value-added tax (VAT) on petroleum products and that is why they have been insistent on having this implemented. Sectors that supply exempt services such as passenger transport (PSV’) and agriculture producers are expected to raise their charges to customers as they are unable to claim back the 8% VAT tax.
- Kerosene, which is used by low-cost households, takes a double hit with the introduction of VAT as well as an anti-adulteration tax of Kshs 18 per litre. Already kerosene now costs more than diesel in some towns around the country.
- Excise duty on sugar confectionery, while opposed by sugar industry groups, was reinstated in a move similar to other countries that are trying to address lifestyle diseases by introducing taxes on sugar products.
- The betting industry, whose survival which was at stake, gets a reprieve as the gaming and lotteries taxes, introduced on January 1, were reduced from 35% to 15%. Many of the prominent betting companies had scaled back their advertising and sponsorship and had turned to engage in serious lobbying efforts ever since. Also, an effective 20% tax on winnings has now been introduced. The earlier tax law allowed bettors to claim some deductions if they kept records, but that has been removed altogether.
Yesterday, State House Kenya sent out a statement about plans for a new Kenya oil pipeline from Lokichar in Turkana to Lamu at the Kenya Coast which Total had now committed to build.
The statement comes at a time when Uganda which is believed to have larger oil fields that Kenya has committed to build an oil pipeline through Tanzania, rather than through Kenya. Also for Kenya which had planned to start oil shipments last year in a pilot project using trucks from Turkana to Mombasa, with Tullow, had that plan temporarily stall over infrastructure and political issues.
Blocks sweeten oil pipeline deal.
The Total offer will be sweetened by the provision of some oil blocks in Kenya. Total is in the processor completing an acquisition of Maersk Oil for $7.45 billion and doing the pipeline for Kenya is one way to get local approval for the deal from the local competition authority.
Following Total SA’s commitment, the Government has consented to a proposed acquisition of the issued and to-be-issued share capital of Maersk Oil Exploration International (Mogas Kenya) in respect of Blocks 10BA, 10BB and 13T.
– State House Kenya statement
Total Kenya is listed on the Nairobi Securities Exchange and Total has been in Kenyan for over sixty years; the company’s operations include eight depots (five of which are solely owned), 2 LPG filling plants and 180 service stations.
The news comes after other oil developments
including Total buying out a majority of Tullow’s oil developments in Uganda, leaving Tullow to concentrate on the oil pipeline through Tanzania.
Also see part I of Oil Pipeline, Economics & Politics.
It has been reported that the National Oil Corporation of Kenya (NOCK) may do an IPO in 2019 with a goal of raising money to buy shares in oil blocks held by Tullow in Turkana, Northern Kenya
The most recently published annual accounts of National Oil were done by the Office of the Government’s Auditor General for the year to June 2014. Surely there are more accounts in the last three years as NOCK has gone through many changes at the board and executive level as well as in auditing requirements.
For the year to June 2014, National Oil had revenue of Kshs 23.6 billion and ended with a deficit of Kshs 657 million, down from a surplus the year before of Kshs 221 million. The audit, done by KPMG for the Auditor General, attributed the loss to the company having dead stocks worth Kshs 929 million at the Kenya Petroleum Refineries which they could not access – and this was probably at the time that the refinery management was the subject of an investment dispute between India’s Essar and the Kenya government.
National Oil had assets of Kshs 9.6 billion which included exploitation in Block 14T located in Magadi Kenya. Exploration work is being funded at Block 14T by a Japan oil & gas corporation (JOGMEC) .
National Oil is wholly owned by the Government of Kenya (99% Treasury, 1% Ministry of Energy) and received capital injection of Kshs 500 million in 2009 that had not been factored in. NOCK trades in refined petroleum, does some petroleum exploration and is mandated at the vehicle for the government of Kenya to participate in the energy sector. It had a $12 million trade finance facility with KCB to purchase stocks and NOCK had also been contracted by the Government to construct a floating oil jetty at Mombasa.
The NOCK listing would be on the Nairobi Securities Exchange and London stock exchange. Perhaps much juicier than National Oil, would be an IPO of Kenya Pipeline which had assets of Kshs 73 billion and a profit go Kshs 10 billion in 2015.
A few weeks ago Tullow Oil gave an update of their half year results with operational updates for different countries including Kenya and Uganda.
- Uganda: Tullow sold a stake in its Uganda oil development to Total Oil for $900 million ($200m cash – $100m on completion, $50m at FID, $50m at first oil, $700m in deferred consideration), and will retain 10% of that and also of a $3.5 billion pipeline through Tanzania. The statement mentions inter-governmental agreements signed to secure pipeline routing and commence key commercial agreements, and last week, Tanzania and Uganda announced the commencement of the construction of a $3.55 billion, 1,445 kilometer-long oil pipeline that will be completed in three years.
- Ghana has sustained low-cost production due to an absence of drilling in 2017.
- Kenya: The Implementation experience of the early Tullow early oil pilot scheme will assist the Tullow oil joint venture, Kenya Government and Turkana county to prepare for full field development (however a previous plan to transport oil by truck had been shelved before the elections amid a dispute of sharing oil revenue).
- South Lokichar Basin: 14 exploration prospects drilled, 11 oil accumulations discovered – estimated billion barrel basin potential.
- Other Tullow oil exploration is ongoing in Ghana, Namibia, Zambia, and Mauritania as well as in South America.